Monthly Archives: October 2011

Are NBA Players’ Salaries Increasing?

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Following up on our recent post about inflation adjusted salaries, I decided to take a look at how NBA player salaries adjusted for inflation and by experience varied across time.
Some trends:

  • salary increases with experience up until about year eight, plateaus until around year eleven, then declines until retirement
  • rookie salaries (years 0-2) have increased over the years
  • years 3-9 peaked in the late 90s to early 00s
  • years 10-14 have been trending upward over time
  • years 15-20 are somewhat trendless, due to small sample sizes
Potential reasons for these trends?
  • salary increases mirror player development, albeit with a few years’ lag
  • salaries for young players (0-3) have no doubt been affected by the rookie scale
  • particulars of the CBAs affecting years 4-9?
  • younger players (high schoolers) and medicine might explain the trend in years 10-14
Oh, and those outliers at years 16 and 17? Guess who!

Superman!

Podcast: Impact of NBA Lockout Strategies on Fans & Economies

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Available in Several Internet Locations Near You

Sports economist David Berri discussed David Stern and Billy Hunter’s recent media tour with Mosi Platt from the Miami Heat Index.

Highlights

  • Why do fans like Arturo Galletti and Ty Willinghanz from the Courtside Analyst blog get so upset with lockouts and strikes by professional sports that they refuse to watch the games when the work stoppage is over?
  • In a press conference at the Beverly Hills hotel, Billy Hunter said the owners will experience pain just like the players during the lockout. He said franchise values wouldn’t recover until 2023 and some teams may have to fold if they lockout the players for an entire season. Does that provide the NBPA leverage in collective bargaining?
  • In “Heads the Owners Win, Tails the Players Lose”, Berri argued the NBA owners will get what they want from their negotiations with the players association. If the NBPA is following the same strategy the MLBPA successfully used against Major League Baseball owners in 1994, then how can that be the case
  • What are the differences between the MLBPA and NBPA?
  • Why does the NBPA seem so concerned about system issues? Isn’t the split of BRI the only thing that matters?
  • Previous research by sports economists Dennis Coates and Brad Humphreys illustrated that per capita income was not affected by work stoppages in professional baseball, football and hockey. Additional research showed sales tax receipts in Florida also were not affected by work stoppages in professional sports. Are those findings still relevant in this recession? Does the NBA lockout reveal potential flaws in the Hooters business model?

Wait there’s more?

Dre here! Mosi Platt has been a podcasting machine this weekend. In case you missed it his other two podcasts can be found here

Why David Stern is full of it

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I have Mike and Mike to thank for making my morning commute just a little brighter. This morning they had David Stern on, which wasn’t good for my happiness level. Here were some of David Stern’s points.

1. The Owners are being more cooperative than the players

This is such a ridiculous thing to say. We need to remember that this is a lockout! That means the owners started it! Why should the players be as cooperative as the owners here? By being cooperative the owners get more money. By being more cooperative the players lose money.

2. The world has changed and the owners are losing money

David Stern pointed out 57% is no longer feasible. Now let’s point out that number is tied to revenue! That means the players salaries stay flat relative to how the league is doing. The NBA may be losing money but it isn’t due to the player salaries, it’s due to external costs. Stern brought up two, which I’ll go into more detail below.

3. Charter jets are expensive

This is an ever popular topic. Oil prices have gone up and planes use oil so this is an unforseen cost that can explain the issue teams are having with money! I decided to look up the cost for a charter jet (I used a 737-200 and 727-200 as my plane type) the prices I’ve seen are around $7,000 hourly. I decided to go ahead and up the cost to $10,000 hourly to adjust for any fuel arguments. A round trip flight to Boston to Los Angeles is around 11 hours (courtesy of Google Flights) Using these two numbers we can get a fun upper bound estimate. If every team paid $10,000 an hour per flight and every flight was a Boston-Los Angeles length flight then the total flight budget for the regular season(41 flights for 30 teams) would be $135 million. The league is claiming losses of over $300 million. In the worst case flights only explain $135 million in total cost! That means the actual hit would have to be somewhere between what the NBA actually expected the flights to cost and the increase in value. In short even if we buy that the NBA was shocked by changing fuel prices and that they paid top dollar for the flights and every flight was as long as can be they still come up over $200 million short. That means every other excuse the NBA is using would have to cover the rest of those costs. That brings me to another point.

4. The NBA needed more employees to handle ticket sales.

David Stern said that demand for the game had dropped. Of course this isn’t true. The way he sold it was that because people were buying tickets in smaller bundles (e.g. sets of 10 instead of sets of 40) that more employees were needed to handle sales. His two main cost points were charter jets (see above) and this! First off are we expected to believe that low wage workers to sell tickets could even make a decent dent in $300 million? Second, do we really believe the NBA is losing costs to employees? Employees were one of the first casualties of the lockout. The NBA has shown no problem cutting employees to cut costs. If they were losing money since the last CBA does Stern really expect us to believe they’d be content losing costs to employees?

David Stern isn’t addressing anything

I didn’t hear David Stern explain how the NBA was going to try and curb the uncontrolled costs. I didn’t hear David Stern explain how the NBA would try to increase revenue. I heard David Stern say the players need to fork over money to help the owners. The issues put forward by the owners seem flimsy. Also if the issues are enough to put the NBA in danger, why aren’t the owners trying to do anything to deal with them in this CBA? David Stern and the owners have done nothing to address the issues and have essentially asked the players for a check. The negotiations have nothing to do with the issue in fact! They have everything to do with the size of the check.

As an NBA fan I want this lockout to end. That said, when I hear David Stern talk, I can’t help but feel more upset at the fact that I am being lied to and the wrong people are being blamed. Instead of locking out the players perhaps the owners should have locked themselves out and hired a new commissioner.

-Dre

The NBA’s Top Earners

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Do not play poker with these two.

The NBA owners’ books are sadly closed to us. A great thing about the players is that their salary numbers are easily accesible. In fact, we have continuous salary data back to 1991 thanks to Patricia Bender and Basketball-Reference. I thought it would be fun to look over some of the top earners in the NBA adjusted for inflation since the 1991 season.  This list only includes players who entered the league on or after the 1990-91 season.

Player Total Salary*  Exp Rookie Year  Per Year
Shaquille O’Neal $354,136,836 19 1993 $18,638,781
Kevin Garnett** $315,370,217 16 1996 $19,710,639
Kobe Bryant** $220,661,776 15 1997 $14,710,785
Tim Duncan** $206,844,796 14 1998 $14,774,628
Jason Kidd** $203,305,233 17 1995 $11,959,131
Chris Webber $198,108,767 15 1994 $13,207,251
Ray Allen** $192,468,929 15 1997 $12,831,262
Tracy McGrady** $183,090,958 14 1998 $13,077,926
Allen Iverson $180,229,709 14 1997 $12,873,551
Rasheed Wallace $179,526,599 15 1996 $11,968,440
Jermaine O’Neal** $178,564,193 15 1997 $11,904,280
Juwan Howard** $172,779,067 17 1995 $10,163,475
Dirk Nowitzki** $155,751,068 13 1999 $11,980,851
Stephon Marbury $153,966,706 13 1997 $11,843,593
Anfernee Hardaway $152,739,135 14 1994 $10,909,938
Paul Pierce** $151,584,132 13 1999 $11,660,318
Dikembe Mutombo $150,861,243 18 1992 $8,381,180
Vince Carter** $148,780,265 13 1999 $11,444,636
Grant Hill** $147,629,190 16 1995 $9,226,824
Alonzo Mourning $145,326,228 15 1993 $9,688,415
Elton Brand** $139,545,457 12 2000 $11,628,788
Antawn Jamison** $139,404,543 13 1999 $10,723,426
Gary Payton $138,324,105 17 1991 $8,136,712
Baron Davis** $130,190,281 12 2000 $10,849,190
Rashard Lewis** $128,652,870 13 1999 $9,896,375
Note 1: All salaries adjusted for inflation and in 2011 value
Note 2: ** denotes active player

Shaq is likely to remain the most highly paid NBA player of all time unless the salary rules change. It’s a bit sad to see Kobe so high on the list, but luckily it’s unlikely he’ll overtake Garnett or Shaq — even with the insane amount of money he’s still due.

This list should illustrate several things though. First of all, some of the greatest players have been severely underpaid. Shaq, Garnett, Kobe, Duncan, and Kidd have all been key members of teams that have been to multiple finals. Despite their big paydays, it’s doubtful they’ve been paid what they were worth to their respective franchises.

Secondly, GMs have massively overpaid some players (Allen Iverson, Rashard Lewis, Jermaine O’Neal and Juwan Howard). This has a lot to do with the rule changes that were made in 1999 that severely limited rookie contracts and enforced player caps based on seniority. As an older player, Rashard Lewis gets more per year than Derrick Rose, LeBron James, and Dwight Howard (the recipients of the last 3 MVPs and Defensive Player of the Year Awards). However, we should note that the people that paid the ultimate cost were not the owners, they were the players who did not make this list.

-Dre and Devin

Stephen A. Smith is Talking About the League

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Prominent economists have proposed that the players should form their own league. However it wasn’t until Amare Stoudemire and Carmelo Anthony picked up the idea that it gained steam. The popular opinion seems to be that this couldn’t work. Stephen A. Smith picked up the torch to explain why the player league couldn’t work in a debate against Skip Bayless.

If the top 20 stars were truly united and they found one dynamo business man who was both scrupulous and wise and could really pull this off then it would have shot.

-Bayless

This idea sounds familiar! I like it! Stephen A Smith was quick to explain why it couldn’t work. He entered with a great interesting line “We’re talking about the league!” which also sounded familiar. . .

What're we talking about?

Let’s break down his points and why I think they’re only slight less crazy than Allen Iverson.

The NBA has a lot of money, and there’s no way the players could make that on their own

Smith dropped a list of a bunch of talents owed a bunch of money including Amare, Carmelo and Kobe. The first issue is the league has now locked out the players for the second time in 15 years to reduce salary. An important second question is why are the players given these big contracts in the NBA? I’m not opposed to the idea that owners are stupid and don’t know how to spend their money. On the same token the players do attract fans and that makes money. In their current barn storming the NBA stars have attracted lots of attention. Somehow the common question seems to be “Where will the money come from?” and given the level of interest that is just foolish. It’s not as if the thirty current owners of the NBA and David Stern are the only people capable of making money with professional basketball.  And we should emphasize, by their own admission they’re bad at it!

The Players are about what’s right and wrong and if the top stars form their own league it will show them as selfish.

Yes. . . that was Stephen Smith’s point: if the stars come off as greedy it will alienate them from their fan base. It’s a lovely thought to believe that sports stars are pinnacles of virtue and that when they tarnish this image the fans care. Carmelo Anthony selfishly left Denver for New York and the New York fans seemed alright with it. Despite his cruel departure from Cleveland, LeBron James was in the most watched finals of all time. How many times do we have to repeat this? Fans like basketball! Work stoppages and poor behavior by stars do not drive them away! Somehow the mainstream media is trying to convince the players that they need to win some PR battle to win the lockout. The truth is that as long as they play basketball and win that fans will be more than happy to pay for it.

The Players Don’t Have Leverage or Options

If you stay within the confines of these negotiations you have no leverage

-Skip  Bayless

In the summer of 2010 when Boozer, Bosh, James, Nowitzki and Wade were free agents there were crazy rumors. Every team in the league that had a shot at one of these players was gunning for them. GMs wined and dined these players and offered them great promises and contracts. Has that disappeared? The stars in the league still have leverage! If every player that’s in the All-Star game or on an All-NBA team decides to ditch the NBA, do you think the owners and more importantly the fans won’t mind? Smith pointed out that there are over 400 players in the league and many of them don’t have this power. That’s actually the point. The players power does lie in their star power. It’s up to them to realize it.

Summing Up

As with many arguments in sports, a lot of Smith’s came from anecdotes. The evidence says that fans like sports, and that if stars are playing the fans will show up and pay for it. It also says that the current ownership will periodically stop play and ask for more money with little regard for the fans or the players. Would a player league be hard or difficult? Yes! But the evidence certainly says it has a shot. And as David Berri was kind enough to point out

Stephen A. Smith said the player league was a stupid idea. So we have one indication it will work!

-Dre